ICE Brent price falls as Gulf concerns ease, US crude build seen

ICE Brent price falls as Gulf concerns ease, US crude build seen

London (Platts)--30Oct2006

ICE Brent futures powered below $60/barrel Monday as concerns over
possible threats to Gulf oil installations eased and the market anticipated
bearish US weekly stock data later in the week, brokers said.
At 1121 London time (1021 GMT) Brent crude for delivery in December was
changing hands at $59.63/barrel which is $1.45 lower than the Friday settle at
$61.08/barrel. Volumes on Brent have recovered from Friday with total Brent
volume standing at 31,000 lots while the front spreads have weakened
significantly. ICE WTI December was trading $1.18 lower at $59.56/barrel. The
spread was trading at around $6.85 per barrel in contango Friday.
On Friday oil prices spiked on reports that the British navy had
redeployed some vessels in the Gulf to counter a possible terrorist threat to
Saudi oil installations.
On Monday, a spokesman said for the British embassy in Dubai said that
there was no new information to suggest an attack against Gulf oil
installations was imminent or that the threat level had changed and that
overall threat levels in the Gulf area have not changed.
"The market is on the soggy side this morning and there is a lot of
attention on expected builds in crude stocks in the US following last weeks
draw as problems at the LOOP are sorted out which is helping the bears," said
one London-based broker. "The aggressive news from Iran has captured a few
headlines but it is not enough to keep the price above $60/barrel because
we've heard it before."
On Monday Iranian President Mahmoud Ahmadinejad warned Iran would give a
"firm response" to any UN sanctions imposed against Tehran over its contested
nuclear programme, the IRNA agency reported.
"We are not looking for tension but any action that aims to limit us will
receive an appropriate and firm response from the Iranian people," said
Ahmadinejad during a gathering in Pishva in Tehran province.
"No one has the right to renounce the absolute rights of the Iranian
people," he added, repeating Iran's refusal to halt uranium enrichment despite
international pressure.
To longer term structure of the Brent futures market has also weakened
sharply with the spread between December 2006 and December 2007 tumbling a
massive 30 cents to around $7.30 per barrel in contango.

COMMERCIALS SHORT 31,097 CONTRACTS; CFTC REPORT
Non-commercials, which are primarily comprised of hedge funds, added to a
long position in the crude futures and options markets on the New York
Mercantile Exchange for the week ending October 24, according to data
released Friday by the Commodity Futures Trading Commission.
Non-commercials were long 41,322 contracts, but the long positions were
being held in the options market. Non-commercials were actually short 5,025
contracts of crude futures. However, non-commercials were long only 35,633
contracts of crude when positions in the financially-settled and e-mini
contracts were added.
"While last week's step into a net short by the Large Speculative funds
was the result of liquidation both by the longs and the shorts, this week the
net short was increased by addition both of the longs and the shorts but with
more size for the shorts," said Olivier Jakob in the risk management
Petromatrix report released Monday.
"The short legs of the Large Speculative funds are now only 7000
contracts away from their historic record which was set last year two
weeks from now."
Commercials, which are comprised of oil companies, refiners
and banks, took the rally back towards the $62/barrel level to add to a short
position. Commercials sold 5,300 contracts of crude futures and options,
leaving them short 31,097 lots with all of the position being held in the
options market. Commercials were still long the futures market for the fourth
consecutive week, suggesting the market may be putting in a bottom.
--Jonathan Davies, jonathan_davies@platts.com

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